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EX-31.01 - EX-31.01 - Aspect FuturesAccess LLCa09-32679_5ex31d01.htm
EX-32.01 - EX-32.01 - Aspect FuturesAccess LLCa09-32679_5ex32d01.htm
EX-31.02 - EX-31.02 - Aspect FuturesAccess LLCa09-32679_5ex31d02.htm
EX-32.02 - EX-32.02 - Aspect FuturesAccess LLCa09-32679_5ex32d02.htm

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2009

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                               to

 

Commission File Number 0-51085

 

ML ASPECT FUTURESACCESS LLC

(Exact Name of Registrant as specified in its charter)

 

Delaware

 

20-1227650

(State or other jurisdiction of

 

(IRS Employer Identification No.)

incorporation or organization)

 

 

 

c/o Merrill Lynch Alternative Investments LLC

Four World Financial Center, 6th Floor

250 Vesey Street

New York, New York 10080

(Address of principal executive offices)

(Zip Code)

 

212-449-3517

(Registrant’s telephone number, including area code)

 

Two World Financial Center, 7th Floor

New York, New York 10281

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes o No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Small reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes o No x

 

As of September 30, 2009, 188,773,991 units of membership were outstanding.

 

 

 



 

ML ASPECT FUTURESACCESS LLC

 

QUARTERLY REPORT FOR SEPTEMBER 30, 2009 ON FORM 10-Q

 

 

 

PAGE

 

 

 

PART I

 

 

 

Item 1.

Financial Statements

1

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

 

 

 

Item 4T.

Controls and Procedures

26

 

 

 

PART II

 

 

 

Item 1.

Legal Proceedings

27

 

 

 

Item 1A.

Risk Factors

27

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

 

 

 

Item 3.

Defaults Upon Senior Securities

28

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

28

 

 

 

Item 5.

Other Information

28

 

 

 

Item 6

Exhibits

28

 



 

PART I - FINANCIAL INFORMATION

 

Item 1.    Financial Statements

 

ML ASPECT FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF FINANCIAL CONDITION

(unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2009

 

2008

 

ASSETS:

 

 

 

 

 

Equity in commodity futures trading accounts:

 

 

 

 

 

Cash (including restricted cash of $34,582,243 for 2009 and $24,334,309 for 2008)

 

$

271,845,918

 

$

334,291,578

 

Net unrealized profit on open contracts

 

11,578,036

 

11,866,510

 

Cash

 

173,548

 

241,619

 

Accrued interest

 

6

 

19,502

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

283,597,508

 

$

346,419,209

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ CAPITAL:

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Brokerage commissions payable

 

$

93,833

 

$

58,192

 

Management fee payable

 

441,617

 

536,784

 

Sponsor fee payable

 

208,046

 

279,746

 

Redemptions payable

 

3,263,168

 

9,241,236

 

Performance fee payable

 

 

15,635,853

 

Other

 

230,465

 

233,592

 

 

 

 

 

 

 

Total liabilities

 

4,237,129

 

25,985,403

 

 

 

 

 

 

 

MEMBERS’ CAPITAL:

 

 

 

 

 

Sponsor’s Interest (20,647 Units)

 

27,334

 

32,331

 

Members’ Interest (188,753,344 Units and 195,021,681 Units)

 

279,333,045

 

320,401,475

 

Total members’ capital

 

279,360,379

 

320,433,806

 

 

 

 

 

 

 

TOTAL LIABILITIES AND MEMBERS’ CAPITAL

 

$

283,597,508

 

$

346,419,209

 

 

 

 

 

 

 

NET ASSET VALUE PER UNIT (SEE NOTE 4)

(Based on 188,773,991 Units outstanding; unlimited Units authorized)

 

 

 

 

 

 

See notes to financial statements.

 

1



 

ML ASPECT FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

For the three

 

For the three

 

For the nine

 

For the nine

 

 

 

months ended

 

months ended

 

months ended

 

months ended

 

 

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

TRADING PROFIT (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized

 

$

3,157,393

 

$

(18,721,939

)

$

(24,225,305

)

$

34,573,670

 

Change in unrealized, net

 

13,848,046

 

(10,105,078

)

(288,474

)

(4,464,601

)

Brokerage commissions

 

(233,906

)

(259,599

)

(624,093

)

(695,188

)

 

 

 

 

 

 

 

 

 

 

Total trading profit (loss)

 

16,771,533

 

(29,086,616

)

(25,137,872

)

29,413,881

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT INCOME:

 

 

 

 

 

 

 

 

 

Interest

 

(3,040

)

1,374,542

 

19,475

 

5,024,851

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Management fee

 

1,303,270

 

1,390,083

 

4,102,303

 

4,161,813

 

Sponsor fee

 

614,008

 

756,448

 

2,069,953

 

2,337,683

 

Performance fee

 

 

(5,675,583

)

17,428

 

4,477,799

 

Other

 

174,459

 

231,969

 

546,582

 

623,363

 

Total expenses

 

2,091,737

 

(3,297,083

)

6,736,266

 

11,600,658

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME (LOSS)

 

(2,094,777

)

4,671,625

 

(6,716,791

)

(6,575,807

)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

14,676,756

 

$

(24,414,991

)

$

(31,854,663

)

$

22,838,074

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER UNIT:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Units outstanding

 

 

 

 

 

 

 

 

 

Class A

 

16,397,934

 

18,658,711

 

17,260,110

 

18,261,886

 

Class C

 

61,135,706

 

76,608,319

 

63,747,235

 

77,285,731

 

Class D

 

6,696,233

 

8,379,222

 

6,842,728

 

11,388,863

 

Class I

 

6,001,078

 

10,229,061

 

6,903,194

 

10,818,177

 

Class DS*

 

56,030,315

 

40,071,360

 

48,930,732

 

28,996,415

 

Class DT**

 

47,766,991

 

60,843,325

 

48,165,447

 

63,760,875

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per weighted average Unit

 

 

 

 

 

 

 

 

 

Class A

 

$

0.0695

 

$

(0.1064

)

$

(0.1745

)

$

0.0980

 

Class C

 

$

0.0639

 

$

(0.1096

)

$

(0.1780

)

$

0.0939

 

Class D

 

$

0.0804

 

$

(0.1141

)

$

(0.1745

)

$

0.1876

 

Class I

 

$

0.0723

 

$

(0.0978

)

$

(0.1701

)

$

0.1250

 

Class DS*

 

$

0.0828

 

$

(0.1201

)

$

(0.1491

)

$

0.0294

 

Class DT**

 

$

0.0841

 

$

(0.1194

)

$

(0.1621

)

$

0.1481

 

 


*Class DS commenced on April 2, 2007 and was previously known as Class D-SM.

**Class DT commenced on June 1, 2007 and was previously known as Class D-TF.

 

See notes to financial statements.

 

2



 

ML ASPECT FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

For the nine months ended September 30, 2009 and 2008

(unaudited in Units)

 

 

 

Members’ Capital
December 31, 2007

 

Subscriptions

 

Redemptions

 

Members’ Capital
September 30, 2008

 

Members’ Capital
December 31, 2008

 

Subscriptions

 

Redemptions

 

Members’ Capital
September 30, 2009

 

Class A

 

17,887,996

 

3,583,599

 

(2,527,950

)

18,943,645

 

18,704,606

 

1,652,973

 

(4,845,471

)

15,512,108

 

Class C

 

79,170,266

 

12,618,888

 

(16,689,387

)

75,099,767

 

68,270,745

 

4,700,324

 

(13,078,859

)

59,892,210

 

Class D

 

16,300,492

 

659,229

 

(8,580,499

)

8,379,222

 

6,915,976

 

 

(659,229

)

6,256,747

 

Class I

 

11,363,798

 

3,063,709

 

(3,583,570

)

10,843,937

 

8,961,247

 

379,007

 

(3,500,890

)

5,839,364

 

Class DS*

 

13,768,122

 

31,718,559

 

(10,038,276

)

35,448,405

 

41,543,859

 

15,050,677

 

(335,326

)

56,259,210

 

Class DT**

 

69,643,298

 

1,552,098

 

(13,655,189

)

57,540,207

 

50,625,248

 

2,350,570

 

(7,982,113

)

44,993,705

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Units

 

208,133,972

 

53,196,082

 

(55,074,871

)

206,255,183

 

195,021,681

 

24,133,551

 

(30,401,888

)

188,753,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

10,319

 

 

 

10,319

 

10,319

 

 

 

10,319

 

Class C

 

10,328

 

 

 

10,328

 

10,328

 

 

 

10,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Sponsor’s Units

 

20,647

 

 

 

20,647

 

20,647

 

 

 

20,647

 

 


*Class DS commenced on April 2, 2007 and was previously known as Class D-SM.

**Class DT commenced on June 1, 2007 and was previously known as Class D-TF.

 

See notes to financial statements.

 

3



 

ML ASPECT FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

For the nine months ended September 30, 2009 and 2008

(unaudited)

 

 

 

Members’ Capital
December 31, 2007

 

Subscriptions

 

Redemptions

 

Net Income
(Loss)

 

Members’ Capital
September 30, 2008

 

Members’ Capital
December 31, 2008

 

Subscriptions

 

Redemptions

 

Net Income
(Loss)

 

Members’ Capital
September 30, 2009

 

Class A

 

$

22,428,464

 

$

4,932,133

 

$

(3,492,714

)

$

1,789,011

 

$

25,656,894

 

$

29,790,712

 

$

2,422,994

 

$

(7,170,497

)

$

(3,012,970

)

$

22,030,239

 

Class C

 

96,858,723

 

16,728,744

 

(22,344,289

)

7,259,152

 

98,502,330

 

105,091,001

 

6,802,811

 

(18,947,961

)

(11,352,561

)

81,593,290

 

Class D

 

21,583,979

 

975,000

 

(12,578,954

)

2,136,724

 

12,116,749

 

11,849,513

 

 

(989,305

)

(1,191,077

)

9,669,131

 

Class I

 

14,374,152

 

4,181,986

 

(5,050,245

)

1,351,901

 

14,857,794

 

14,465,113

 

578,986

 

(5,440,322

)

(1,168,525

)

8,435,252

 

Class DS*

 

18,235,954

 

46,281,581

 

(14,003,395

)

853,916

 

51,368,056

 

70,902,871

 

23,472,610

 

(501,078

)

(7,303,288

)

86,571,115

 

Class DT**

 

92,508,126

 

2,229,234

 

(20,074,451

)

9,445,423

 

84,108,332

 

88,302,264

 

3,561,720

 

(13,008,722

)

(7,821,244

)

71,034,018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Interest

 

$

265,989,398

 

$

75,328,678

 

$

(77,544,048

)

$

22,836,127

 

$

286,610,155

 

$

320,401,475

 

$

36,839,121

 

$

(46,057,885

)

$

(31,849,666

)

$

279,333,045

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

$

12,940

 

$

 

$

 

$

1,037

 

$

13,977

 

$

16,435

 

$

 

$

 

$

(2,506

)

$

13,929

 

Class C

 

12,636

 

 

 

910

 

13,546

 

15,896

 

 

 

(2,491

)

13,405

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Sponsor’s Interest

 

$

25,576

 

$

 

$

 

$

1,947

 

$

27,523

 

$

32,331

 

$

 

$

 

$

(4,997

)

$

27,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Capital

 

$

266,014,974

 

$

75,328,678

 

$

(77,544,048

)

$

22,838,074

 

$

286,637,678

 

$

320,433,806

 

$

36,839,121

 

$

(46,057,885

)

$

(31,854,663

)

$

279,360,379

 

 


*Class DS commenced on April 2, 2007 and was previously known as Class D-SM.

**Class DT commenced on June 1, 2007 and was previously known as Class D-TF.

 

See notes to financial statements.

 

4



 

ML ASPECT FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

2009

 

2009

 

2009

 

2009

 

2009

 

2009

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class DS*

 

Class DT**

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.3497

 

$

1.2980

 

$

1.4633

 

$

1.3715

 

$

1.4570

 

$

1.4930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized and change in unrealized trading profit (loss)

 

0.0846

 

0.0812

 

0.0918

 

0.0860

 

0.0914

 

0.0938

 

Brokerage commissions

 

(0.0012

)

(0.0011

)

(0.0013

)

(0.0012

)

(0.0013

)

(0.0013

)

Interest income

 

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

Expenses

 

(0.0130

)

(0.0158

)

(0.0084

)

(0.0118

)

(0.0083

)

(0.0067

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.4201

 

$

1.3623

 

$

1.5454

 

$

1.4445

 

$

1.5388

 

$

1.5788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

5.22

%

4.95

%

5.61

%

5.32

%

5.61

%

5.75

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Total return after Performance fees

 

5.22

%

4.95

%

5.61

%

5.32

%

5.61

%

5.75

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Members’ Capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

0.95

%

1.20

%

0.57

%

0.85

%

0.57

%

0.44

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Expenses (including Performance fees)

 

0.95

%

1.20

%

0.57

%

0.85

%

0.57

%

0.44

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-0.95

%

-1.20

%

-0.57

%

-0.85

%

-0.57

%

-0.44

%

 


*Class DS and was previously known as Class D-SM.

**Class DT was previously known as Class D-TF.

 

See notes to financial statements.

 

5



 

ML ASPECT FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

2009

 

2009

 

2009

 

2009

 

2009

 

2009

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class DS*

 

Class DT**

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.5927

 

$

1.5393

 

$

1.7134

 

$

1.6142

 

$

1.7067

 

$

1.7442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized and change in unrealized trading profit (loss)

 

(0.1281

)

(0.1236

)

(0.1382

)

(0.1300

)

(0.1376

)

(0.1408

)

Brokerage commissions

 

(0.0031

)

(0.0030

)

(0.0034

)

(0.0032

)

(0.0034

)

(0.0035

)

Interest income

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

Expenses

 

(0.0415

)

(0.0505

)

(0.0265

)

(0.0366

)

(0.0270

)

(0.0212

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.4201

 

$

1.3623

 

$

1.5454

 

$

1.4445

 

$

1.5388

 

$

1.5788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

-10.84

%

-11.50

%

-9.83

%

-10.57

%

-9.83

%

-9.49

%

Performance fees

 

0.00

%

0.00

%

-0.01

%

0.01

%

-0.02

%

0.00

%

Total return after Performance fees

 

-10.84

%

-11.50

%

-9.84

%

-10.56

%

-9.85

%

-9.49

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Members’ Capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

1.68

%

1.30

%

2.28

%

1.68

%

1.68

%

1.30

%

Performance fees

 

-0.01

%

-0.01

%

0.00

%

-0.02

%

0.01

%

-0.01

%

Expenses (including Performance fees)

 

1.67

%

1.30

%

2.28

%

1.66

%

1.69

%

1.30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-2.78

%

-3.53

%

-1.67

%

-2.47

%

-1.68

%

-1.29

%

 


*Class DS and was previously known as Class D-SM.

**Class DT was previously known as Class D-TF.

 

See notes to financial statements.

 

6



 

ML ASPECT FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.               SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

ML Aspect FuturesAccess LLC (the “Fund”) was organized under the Delaware Limited Liability Company Act on May 17, 2004 and commenced trading activities on April 1, 2005. The Fund issues new units of limited liability company interest (“Units”) at Net Asset Value per Unit. The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Aspect Capital Limited (“Aspect”) is the trading advisor of the Fund.

 

Merrill Lynch Alternative Investments LLC (“MLAI”) is the sponsor (“Sponsor”) and manager (“Manager”) of the Fund. MLAI is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. (“Merrill Lynch”).  Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned subsidiary of Merrill Lynch, is the Fund’s commodity broker. On September 15, 2008, Merrill Lynch entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 dated as of October 21, 2008, the “Merger Agreement”) with Bank of America Corporation (“Bank of America”). Pursuant to the Merger Agreement, on January 1, 2009, a wholly-owned subsidiary of Bank of America merged with and into Merrill Lynch, with Merrill Lynch continuing as the surviving corporation and a subsidiary of Bank of America.

 

In the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of the Fund as of September 30, 2009, and the results of its operations for the three and nine months ended September 30, 2009 and 2008.  However, the operating results for the interim periods may not be indicative of the results for the full year.

 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2008.

 

In July 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 105, Generally Accepted Accounting Principles, (ASC 105), which approved the FASB Accounting Standards Codification (the “Codification”) as the single source of authoritative nongovernmental GAAP. The Codification is effective for interim or annual periods ending after September 15, 2009. All existing accounting standards have been superseded and all other accounting literature not included in the Codification will be considered nonauthoritative. ASC 105 was not intended to change the accounting literature and did not impact the Fund’s financial condition or results of operations.  All accounting references within this report are in accordance with the new Codification.

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

7



 

2.               CONDENSED SCHEDULES OF INVESTMENTS

 

The Fund’s investments, defined as Net unrealized profit (loss) on open contracts in the Statements of Financial Condition as of September 30, 2009 and December 31, 2008 are as follows:

 

September 30, 2009

 

 

 

Long Positions

 

Short Positions

 

Net Unrealized

 

 

 

 

 

Commodity Industry
Sector

 

Number of
Contracts

 

Unrealized
Profit (Loss)

 

Percent of
Members’ Capital

 

Number of
Contracts

 

Unrealized
Profit (Loss)

 

Percent of
Members’ Capital

 

Profit (Loss)
on Open Positions

 

Percent of
Members’ Capital

 

Maturity Dates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

1,257

 

$

1,696,664

 

0.61

%

(1,551

)

$

250,472

 

0.09

%

$

1,947,136

 

0.70

%

December 2009 - March 2010

 

Currencies

 

46,750,014

 

797,979

 

0.29

%

(185,150

)

1,701,265

 

0.61

%

2,499,244

 

0.90

%

March 2010

 

Energy

 

6

 

(21,987

)

-0.01

%

(654

)

(1,196,665

)

-0.43

%

(1,218,652

)

-0.44

%

December 2009 - March 2010

 

Interest rates

 

10,679

 

5,675,375

 

2.03

%

(657

)

166,929

 

0.06

%

5,842,304

 

2.09

%

December 2009 - March 2012

 

Metals

 

748

 

1,932,234

 

0.69

%

(87

)

(173,996

)

-0.06

%

1,758,238

 

0.63

%

January 2010 - March 2010

 

Stock indices

 

2,021

 

713,298

 

0.26

%

(46

)

36,468

 

0.01

%

749,766

 

0.27

%

January 2010 - March 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

10,793,563

 

3.87

%

 

 

$

784,473

 

0.28

%

$

11,578,036

 

4.15

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long Positions

 

Short Positions

 

Net Unrealized

 

 

 

 

 

Commodity Industry
Sector

 

Number of
Contracts

 

Unrealized
Profit (Loss)

 

Percent of
Members’ Capital

 

Number of
Contracts

 

Unrealized
Profit (Loss)

 

Percent of
Members’ Capital

 

Profit (Loss)
on Open Positions

 

Percent of
Members’ Capital

 

Maturity Dates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

145

 

$

333,270

 

0.11

%

(1,240

)

$

(860,947

)

-0.27

%

$

(527,677

)

-0.17

%

January 2009 - March 2009

 

Currencies

 

2,211,124

 

1,544,260

 

0.48

%

(461,942

)

(2,356,344

)

-0.74

%

(812,084

)

-0.26

%

January 2009

 

Energy

 

41

 

75,848

 

0.02

%

(407

)

946,274

 

0.30

%

1,022,122

 

0.32

%

February 2009

 

Interest rates

 

8,731

 

13,032,113

 

4.07

%

 

 

0.00

%

13,032,113

 

4.07

%

March 2009 - March 2010

 

Metals

 

45

 

88,866

 

0.03

%

(503

)

(723,498

)

-0.23

%

(634,632

)

-0.20

%

February 2009 - April 2009

 

Stock indices

 

3

 

3,950

 

0.00

%

(176

)

(217,282

)

-0.07

%

(213,332

)

-0.07

%

January 2009 - March 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

15,078,307

 

4.70

%

 

 

$

(3,211,797

)

-1.01

%

$

11,866,510

 

3.69

%

 

 

 

No individual contract’s unrealized gain or loss comprised greater than 5% of the Members’ Capital as of September 30, 2009 and December 31, 2008.

 

8



 

The Fund’s net unrealized profit (loss) on open forward and futures contracts as of September 30, 2009 and December 31, 2008 are as follows:

 

September 30, 2009

 

Unrealized Long Positions

 

Unrealized Short Positions

 

Total

 

Futures

 

$

10,040,990

 

$

(916,790

)

$

9,124,200

 

Forwards

 

752,573

 

1,701,263

 

2,453,836

 

Total

 

$

10,793,563

 

$

784,473

 

$

11,578,036

 

 

 

 

 

 

 

 

 

December 31, 2008

 

Unrealized Long Positions

 

Unrealized Short Positions

 

Total

 

Futures

 

$

13,534,047

 

$

(855,453

)

$

12,678,594

 

Forwards

 

1,544,260

 

(2,356,344

)

(812,084

)

Total

 

$

15,078,307

 

$

(3,211,797

)

$

11,866,510

 

 

3.               FAIR VALUE OF INVESTMENTS

 

In September 2006, the FASB issued authoritative guidance on fair value measurement. This guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Fund adopted this guidance as of January 1, 2008. The adoption of this guidance did not have a material impact on the Fund’s financial statements.

 

Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes.  The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date.  Gains or losses are realized when contracts are liquidated.  Unrealized gains or losses on open contracts are included in equity in commodity futures trading account.  Any change in net unrealized gain or loss from the preceding period is reported in the Statement of Operations.

 

The fair value measurement guidance established a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

 

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

 

Level I — Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.

 

Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.

 

9



 

Level III — Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the Fair Value Measurement. The Sponsor’s assessment of the significance of a particular input to the Fair Value Measurement in its entirety requires judgment, and considers factors specific to the investment.

 

Following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.

 

Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where it trades such investments.  These closing prices are observed through the clearing broker and third party pricing services. For non exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.

 

The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.

 

Upon adoption of the fair value measurement guidance the Fund has determined that Level I securities would include all of its futures and options contracts where it believes that quoted prices are available in an active market.

 

Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of securities with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II securities. The Fund determined that Level II securities would include its forward contracts.

 

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of September 30, 2009 and December 31, 2008:

 

 

 

Total

 

Level I

 

Level II

 

Level III

 

Net unrealized profit (loss) on open contracts

 

 

 

 

 

 

 

 

 

September 30, 2009

 

$

11,578,036

 

$

9,124,200

 

$

2,453,836

 

N/A

 

December 31, 2008

 

$

11,866,510

 

$

12,678,594

 

$

(812,084

)

N/A

 

 

10



 

Effective January 1, 2009, the Fund adopted the guidance on disclosures about derivative instruments and hedging activities which requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This guidance only expands the disclosure requirements for derivative instruments and related hedging activities and has no impact on Statements of Financial Condition or Statements of Operations and Member’s Capital.

 

The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the guidance for derivatives and hedging. The fair value amounts of and the gains and losses on derivative instruments is disclosed in the statements of financial condition and statements of operations, respectively. There are no credit related contingent features embedded in these derivative contracts.

 

The following table indicates the trading gains and losses, by commodity industry sector, on derivative instruments for each of the three month and nine month periods ended September 30, 2009:

 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30, 2009

 

September 30, 2009

 

Commodity Industry

 

Gain (loss)

 

Gain (loss)

 

Sector

 

from trading

 

from trading

 

 

 

 

 

 

 

Agriculture

 

2,551,632

 

2,025,112

 

Currencies

 

2,860,778

 

(7,943,413

)

Energy

 

(3,300,251

)

(9,969,754

)

Interest rates

 

9,102,154

 

(4,994,624

)

Metals

 

2,781,743

 

(5,312,490

)

Stock indices

 

3,009,383

 

1,681,390

 

 

 

 

 

 

 

Total

 

17,005,439

 

(24,513,779

)

 

The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse or MLPF&S.  Fund assets could be lost or impounded during lengthy bankruptcy proceedings.  Were a substantial portion of the Fund’s capital tied up in a bankruptcy, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities.  There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to “customer funds” deposited with regulated dealers and brokers.

 

11



 

4.               NET ASSET VALUE PER UNIT

 

The Net Asset Value per Unit of the different Classes at September 30, 2009 and December 31, 2008 are as follows:

 

September 30, 2009

 

Net Asset Value per Unit

 

 

 

 

 

Class A

 

$

1.4201

 

Class C

 

1.3623

 

Class D

 

1.5454

 

Class I

 

1.4445

 

Class DS

 

1.5388

 

Class DT

 

1.5788

 

 

December 31, 2008

 

Net Asset Value per Unit

 

 

 

 

 

Class A

 

$

1.5927

 

Class C

 

1.5393

 

Class D

 

1.7134

 

Class I

 

1.6142

 

Class DS

 

1.7067

 

Class DT

 

1.7442

 

 

5.               MARKET AND CREDIT RISK

 

The nature of this Fund has certain risks, which cannot be presented on the financial statements.  The following summarizes some of those risks.

 

Market Risk

 

Derivative instruments involve varying degrees of market risk.  Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Fund’s Net unrealized profit (loss) on such derivative instruments as reflected in the Statements of Financial Condition. The Fund’s exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investment in foreign markets may also entail legal and political risks.

 

MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so.  These procedures focus primarily on monitoring the trading of Aspect, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations.  While MLAI does not intervene in the markets to hedge or diversify the Fund’s market exposure, MLAI may urge Aspect to reallocate positions in an attempt to avoid over-concentrations.  However, such interventions are expected to be unusual.  It is expected that MLAI’s basic risk control procedures will consist simply of the ongoing process of advisor monitoring, with the market risk controls being applied by Aspect.

 

12



 

Credit Risk

 

The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange.  In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties.  Margins, which may be subject to loss in the event of a default, are generally required in exchange trading, and counterparties may also require margin in the over-the-counter markets.

 

The credit risk associated with these instruments from counterparty nonperformance is the Net unrealized profit, if any, included in the Statements of Financial Condition. The Fund attempts to mitigate this risk by dealing exclusively with Merrill Lynch entities as clearing brokers.

 

The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its commodity broker.  Pursuant to the brokerage arrangement with MLPF&S (which includes a netting arrangement), to the extent that such trading results in receivables from and payables to MLPF&S, these receivables and payables are offset and reported as a net receivable or payable and included in Equity in commodity futures trading accounts in the Statements of Financial Condition.

 

6.               RECENT ACCOUNTING PRONOUNCEMENTS

 

In April 2009, the FASB issued guidance on determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. This guidance provides additional guidance for estimating fair value in accordance with FASB guidance on fair value measurements, when the volume and level of activity for the asset or liability have significantly decreased. This guidance also identifies circumstances that indicate a transaction is not orderly. The guidance emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. The guidance also contains enhanced disclosure requirements whereby fair value disclosures as well as certain disaggregated information will be disclosed. The adoption of this guidance has no impact on the financial statements.

 

In September 2009, the FASB issued Accounting Standards Update No. 2009-12, Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (the “ASU 2009-12”), which is effective for interim or annual financial periods ending after December 15, 2009. At this time, the Manager is evaluating the implications of this statement.  However, the adoption is not expected to have material impact on the Fund’s financial statements.

 

13



 

7.               SUBSEQUENT EVENTS

 

The Fund has performed an evaluation of subsequent events through November 12, 2009, which is the date the financial statements were issued, and determined that there are no subsequent events that require an adjustment of or disclosure in the financial statements.

 

Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

MONTH-END NET ASSET VALUE PER UNIT

 

MLAI believes that the Net Asset Value used to calculate subscription and redemption value and to report performance to investors throughout the year is the most valuable performance measure to the Members of the Fund.  Therefore, the charts below referencing Net Asset Value and performance measurements are based on the Net Asset Value for financial reporting purposes as discussed in Note 4 to the financial statements.

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May.

 

Jun.

 

Jul.

 

Aug.

 

Sept.

 

2008

 

$

1.3141

 

$

1.4206

 

$

1.3950

 

$

1.3319

 

$

1.3723

 

$

1.4646

 

$

1.3590

 

$

1.3134

 

$

1.3544

 

2009

 

$

1.5995

 

$

1.6080

 

$

1.5546

 

$

1.5051

 

$

1.4710

 

$

1.3497

 

$

1.3304

 

$

1.3808

 

$

1.4201

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May.

 

Jun.

 

Jul.

 

Aug.

 

Sept.

 

2008

 

$

1.2812

 

$

1.3839

 

$

1.3578

 

$

1.2952

 

$

1.3335

 

$

1.4221

 

$

1.3183

 

$

1.2729

 

$

1.3116

 

2009

 

$

1.5447

 

$

1.5516

 

$

1.4988

 

$

1.4499

 

$

1.4159

 

$

1.2980

 

$

1.2783

 

$

1.3257

 

$

1.3623

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May.

 

Jun.

 

Jul.

 

Aug.

 

Sept.

 

2008

 

$

1.3898

 

$

1.5043

 

$

1.4790

 

$

1.4131

 

$

1.4586

 

$

1.5606

 

$

1.4478

 

$

1.4000

 

$

1.4464

 

2009

 

$

1.7234

 

$

1.7347

 

$

1.6790

 

$

1.6277

 

$

1.5928

 

$

1.4633

 

$

1.4441

 

$

1.5007

 

$

1.5454

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May.

 

Jun.

 

Jul.

 

Aug.

 

Sept.

 

2008

 

$

1.3268

 

$

1.4348

 

$

1.4094

 

$

1.3460

 

$

1.3874

 

$

1.4815

 

$

1.3746

 

$

1.3287

 

$

1.3707

 

2009

 

$

1.6225

 

$

1.6316

 

$

1.5781

 

$

1.5284

 

$

1.4943

 

$

1.3715

 

$

1.3523

 

$

1.4041

 

$

1.4445

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DS

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May.

 

Jun.

 

Jul.

 

Aug.

 

Sept.

 

2008

 

$

1.3899

 

$

1.5043

 

$

1.4792

 

$

1.4146

 

$

1.4589

 

$

1.5579

 

$

1.4487

 

$

1.3950

 

$

1.4491

 

2009

 

$

1.7162

 

$

1.7274

 

$

1.6719

 

$

1.6207

 

$

1.5860

 

$

1.4570

 

$

1.4379

 

$

1.4943

 

$

1.5388

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DT

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May.

 

Jun.

 

Jul.

 

Aug.

 

Sept.

 

2008

 

$

1.3982

 

$

1.5206

 

$

1.4941

 

$

1.4248

 

$

1.4730

 

$

1.5804

 

$

1.4624

 

$

1.4125

 

$

1.4617

 

2009

 

$

1.7551

 

$

1.7679

 

$

1.7110

 

$

1.6593

 

$

1.6245

 

$

1.4930

 

$

1.4740

 

$

1.5325

 

$

1.5788

 

 

14



 

Liquidity and Capital Resources

 

The Fund does not engage in the sale of goods or services.  The Fund’s assets are its (i) equity in its trading account, consisting of cash and cash equivalents and (ii) interest receivable.  Because of the low margin deposits normally required in commodity futures trading relatively small price movements may result in substantial losses to the Fund.  While substantial losses could lead to a material decrease in liquidity, no such material losses occurred during the third quarter of 2009 and there was no impact on the Fund’s liquidity.

 

The Fund’s capital consists of the capital contributions of the members as increased or decreased by gains or losses on trading, expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

 

For the nine months ended September 30, 2009, Fund capital decreased 12.82% from $320,433,806 to $279,360,379.  This decrease was attributable to the net loss from operations of $31,854,663, coupled with the redemption of 30,401,888 Redeemable Units resulting in an outflow of $46,057,885.  The cash outflow was offset with cash inflow of $36,839,121 due to subscription of 24,133,551 units.  Future redemptions could impact the amount of funds available for investment in commodity contract positions in subsequent months.

 

Critical Accounting Policies

 

Use of Estimates

 

The preparation of financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“GAAP”‘) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes.  As a result, actual results could differ from these estimates.

 

Statement of Cash Flows

 

The Fund has elected not to provide a Statement of Cash Flows as permitted by the ASC guidance for Statement of Cash Flows specifically relating to the exemption of certain enterprises and the classification of cash flows from certain securities acquired for resale.

 

Investments

 

All investments (including derivatives) are held for trading purposes.  Investments are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date.  Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date.  Gains or losses are realized when contracts are liquidated.  Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statements of Financial Condition.  Realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Statements of Operations and Statements of Changes in Members’ Capital.

 

15



 

Fair Value Measurements

 

The Fund adopted guidance on fair value measurements as of January 1, 2008 which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Fund did not apply the deferral allowed for nonfinancial assets and nonfinancial liabilities measured at fair value on a nonrecurring basis.  For more information on our treatment of fair value, see Note 3, Fair Value of Investments.

 

Futures Contracts

 

The Fund trades futures contracts.  A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as S&P 500 Index), whereby such contract is settled in cash.  Payments (“variation margin”) may be made or received by the Fund each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Fund.  When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.  Because transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded, credit exposure is limited.  Realized gains (losses) and changes in unrealized gains (losses) on futures contracts are included in the Statements of Operations and Statements of Changes in Members’ Capital.

 

Forward Foreign Currency Contracts

 

Foreign currency contracts are those contracts where the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date.  Foreign currency contracts are valued daily, and the Fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Operations.  Realized gains (losses) and changes in unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively and are included in the Statements of Operations and Statements of Changes in Members’ Capital.

 

Income Taxes

 

Income taxes have not been provided as each member is individually liable for the taxes, if any, on their share of the Fund’s income and expenses and Members’ Capital.

 

In 2007, the Fund adopted the guidance on accounting for uncertainty in income taxes.  This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority.  Tax positions with respect to tax at the Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year.  MLAI has concluded that the adoption of this guidance had no impact on the operations of the Fund for the period ended September 30, 2009 and that no provision for income tax is required in the Fund’s financial statements.

 

16



 

Results of Operations

 

January 1, 2009 to March 31, 2009

 

The Fund experienced a net trading loss before brokerage commissions and related fees in the first quarter of 2009 of $4,394,485.  Losses were primarily attributable to Fund’s trading in the energy sector posting profits while the interest rate, metals, agriculture, stock indices and currencies sectors posted losses.

 

The energy sector posted profits for the Fund. Profits were posted to the Fund at the beginning of the quarter driven by gains from crude oil and natural gas, whose prices declined from bearish inventory data. The Fund’s short positions in natural gas and products of crude oil posted profits to the Fund in the middle of the quarter. The quarter ended with losses being posted to the Fund as crude oil prices rose despite OPEC announcing that it will not cut output.

 

The interest rate sector posted losses for the Fund. The quarter began with losses being posted to the Fund due to bonds being sold off and interest rates rose as governments continued to develop rescue plans and packages to boost growth. This was particularly seen in European bond markets with U.K. Gilts and Bunds being two of the worst contracts. However, the Fund’s long positions in interest rates benefited from the rate cut decisions of the Bank of England and the European Central Bank but were not enough to offset the losses. Long positions in the interest rate model was profitable for the Fund in the middle of the quarter however, performance was dragged down by losses in short positions in the Australian dollar and British sterling as quantitative easing seemed more likely than further interest rate cuts in the United Kingdom. The U.S. Federal Reserve’s plan to repurchase debt caused U.S. fixed income markets to rally. U.S. interest rate markets and European fixed income markets followed and the Fund’s long positions posted profits to the Fund at the end of the quarter.

 

The metals sector posted losses for the Fund. Profits were posted to the Fund at the beginning of the quarter as industrial metals declined due to stock build-ups which benefited from the Fund’s short positions. Losses were posted in the middle of the quarter due to volatility in the global markets. Revised inflationary expectations caused commodities markets to rally to the detriment of the Fund’s short positions in base metals posting losses to the Fund as the quarter ended. Precious metals declined as investors sold out of safe haven assets which was also detrimental to the Fund’s long positions.

 

The agriculture sector posted losses for the Fund. Profits were posted to the Fund at the beginning through the middle of the quarter despite losses from a sharp reversal in cocoa markets. Losses were posted to the Fund at the end of the quarter due to challenging market conditions.

 

The stock indices sector posted losses for the Fund. Profits were posted to the Fund at the beginning of the quarter due to the stock markets rallying with renewed investor optimism in response to the U.S. President Obama’s stimulus plan. Profits continued to be posted to the Fund through the middle of the quarter as global equity markets continue their poor performance caused by further weak economic data and problems for financial companies which benefited the Fund’s short positions. Although most global stock markets remain in negative territory at the end of the quarter, many saw a strong rally to the detriment of the Fund’s short positions resulting in losses being posted to the Fund.

 

The currency sector posted losses for the Fund. The U.S. dollar continued strengthening as a result of risk aversion and the increasingly negative outlook for Europe. Europe continues to deal with crises in the financial sector particularly in the weakness of the British sterling to the benefit of the Fund’s short positions resulting in profits being posted to the fund at the beginning of the quarter. Profits were posted to the Fund in the middle of the quarter. The currencies sector had an eventful February and provided the most volatility; profits were seen from weakness in the Swedish krona and Canadian dollar which offset losses in the Japanese yen against the U.S. dollar. The Swedish krona fell to a record low against the

 

17



 

Euro after an unexpectedly large rate-cut and the worst Swedish GDP figures since 1940. The quarter ended with losses being posted to the Fund. The announcement of the U.S. Treasury’s new plans resulted in the U.S. dollar weakening against major currencies resulting in losses being posted to the Fund at the end of the quarter.

 

April 1, 2009 to June 30, 2009

 

The Fund experienced a net trading loss before brokerage commissions and related fees in the second quarter of 2009 of $37,124,733. The Fund posted overall losses for the quarter with the agriculture and stock indices sector posting profits while the metals, currencies, energy and interest rates sectors posted losses.

 

The agriculture sector posted profits for the Fund. Profits were posted to the Fund at the beginning of the quarter driven by short positions in lean hogs following concerns over swine flu. Losses were posted to the Fund in the middle of the quarter due to challenging market conditions. Commodities markets rallied at the end of quarter which benefited long positions in agricultural such as sugar and soy meal resulting in profits posted to the Fund.

 

The stock indices posted profits for the Fund. Losses were posted to the Fund as most equity index positions also suffered from this rally continuing in early April, but positions responded and small profits were seen in the MSCI Taiwan index and in European sectors indices only. Positive economic releases continued to boost investor optimism and risk appetite; consequently global stock indices finished the month positively posting profits to the Fund in the middle of the quarter. Rallying equity markets continued to boost investor optimism resulting in profits posted to the Fund at the end of the quarter.

 

The metals sectors posted losses for the Fund. Losses were posted to the Fund at the beginning of the quarter due short positions in aluminum and nickel which suffered losses due to markets anticipation increased demand as equities rallied following the G20 summit. Improving global outlook prompted most commodity markets to rally resulting in profits being posted to the Fund in the middle of the quarter. Short positions in metals including aluminum resulted in losses being posted to the Fund at the end of the quarter.

 

The currency sector posted losses for the Fund. Trend reversals were seen in late March continuing into April resulting in losses being posted to the Fund. The British sterling and the Canadian dollar recovered following recent weakness and the resulting losses outweighed the profits seen from the strengthening South African rand. Short positions in the British sterling rallied in the middle of the quarter following the latest United Kingdom inflation report however, increased risk appetite resulted in a sell off in the U.S. dollar which hit 2009 lows resulting in losses being posted to the Fund. The United States dollar, which had been weakening since the United States Federal Reserve announced its quantitative easing policies in March, regained some of its strength and the recent trend in short-term interest rates reversed. The Euro dollar, the British sterling and Euribor all saw their most aggressive selling since October 2008. These sharp moves resulted in losses on the Program’s long positions in these contracts. In response, the Program reduced its positions as volatility increased. Performance in other sectors also reflected the difficult market environment for medium-term trend-following strategies. In currencies, the losses in the U.S. dollar positions were compounded by losses in the Swiss franc and Japanese yen; these were partially offset by gains on the Program’s short Euro exposure.

 

The energy sector posted losses for the Fund. Profits were posted to the Fund at the beginning of the quarter driven by short positions in natural gas which reached multi year lows. Prices of energies were boosted by bullish inventory particularly in natural gas but did not offset the losses due to a volatile global market posting losses to the Fund from the middle to the end of the quarter.

 

The interest rate sector posted losses for the Fund. The quarter began with losses being posted to the Fund due to trend reversals seen in late March continuing into the beginning of the quarter due to the European Central Bank’s surprise decision to reduce rates. Profits were posted to the Fund in the middle

 

18



 

of the quarter due to rallying equity markets accompanied by a sell-off in fixed income markets. This was to the benefit of the Program’s short positions in several bond contracts, most notably the Japanese and Australian government bonds. The quarter ended with losses being posted to the Fund due to the difficult market environment. The bonds sector saw losses with the Program’s short exposure to Japanese Government bonds suffering from the weak outlook for the Japanese economy.

 

July 1, 2009 to September 30, 2009

 

The Fund experienced a net trading profit of $17,005,439 before brokerage commissions and related fees in the third quarter of 2009 of $233,906. The Fund posted overall profits for the quarter with interest rates, stock indices, currencies, metals and agriculture sectors posting profits while the energy sector posted losses.

 

The interest rate sector posted profits for the Fund. Profits were posted to the Fund at the beginning of the quarter. Global equity markets sold off at the start of July in response to poor economic data in the United States. In addition, the European Central Bank announced that it would keep interest rates on hold at their current levels resulting in a rally in fixed income markets which benefited the Fund’s long position exposure to European bonds and short term interest rates. The major central banks reiterated in August that interest rate increases are unlikely in the near term, causing the prices of short term interest rate futures to rise resulting in profits being posted to the Fund. The European Central Bank cautioned in September that it was too early to unwind monetary stimuli, which resulted in fixed income markets, particularly short term interest rates rallying as the likelihood of interest rate hikes was discounted resulting in profits being posted to the Fund at the end of the quarter.

 

The stock indices posted profits for the Fund. Losses were posted to the Fund at the beginning of the quarter as global equity markets sold off in response to poor economic data in the United States. Profits were posted to the Fund in the middle of the quarter as the recovery of risk appetite continued with global stock markets finishing higher at the end of August.  Global stock markets started the month of September on a decline following some poor economic data from the United States and the United Kingdom. Sentiment later recovered and stock markets rallied following more positive economic releases, increased merger activity and comments by the European Central Bank indicating that the worst of the recession is over resulted in profits being posted to the Fund at the end of the quarter.

 

The currency sector posted profits for the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter as corporate earnings, announcements across a broad range of industries exceeded analysts forecasts. Increased risk appetite in turn resulted in commodities markets rallying; the United States dollar weakened and the Fund’s net short United States dollar exposure also saw losses. Profits were posted to the Fund at the end of the quarter as the United States dollar sold off and the Dollar Index hit its lowest levels since September 2008.

 

The metals sector posted profits for the Fund throughout the quarter with copper rallying in August and precious metals rallying in September. Precious metals were the key within this sector resulting in strong gains on long positions in gold and silver.

 

The agriculture sector posted profits for the Fund. Losses were posted to the Fund at the beginning of the quarter due to the Fund’s long positions in the soy complex suffered as grains sold off in early in the month due to favorable weather conditions in the United States. Profits were posted to the Fund in the middle of the quarter due to long positions in sugar which provided most of the profit, as global supplies and crop forecasts declined due to adverse weather conditions in Brazil and India, pushing prices to 28 year highs. The quarter ended with losses being posted to the Fund due to volatility in global markets.

 

19



 

The energy sector posted losses for the Fund. Losses were posted to the Fund at the beginning of the quarter as short positions in natural gas continued to be profitable as mild weather and inventory build up pushed prices downwards. However, these gains were more than offset by losses on short positions across most of the other energy markets. Profits were posted to the Fund in the middle of the market as natural gas profits came on the short side as inventory build ups pushed prices down to a seven year low. Positions elsewhere in the energies sector were less successful as the oil price became more range bound. The quarter ended with losses being posted to the Fund as the front month natural gas contracts eventually rallied from seven year lows following bullish inventory data and short covering. Consequently, the Program’s short positions in energy resulted in losses for the Fund.

 

January 1, 2008 to March 31, 2008

 

The Fund experienced a net trading gain before brokerage commissions and related fees in the first quarter of 2008 of $38,118,954.  Gains were primarily attributable to the Fund’s trading in interest rates, agriculture, stock indices, currencies, and the metal sectors posting gains while the energy sector posted losses.

 

The interest rate sector posted profits for the Fund at the beginning of the year. The weak economic data early in January suggested an increased likelihood of a recession that was reflected in an increased level of risk aversion on the part of many investors. This prompted the U.S. Federal Reserve to cut interest rates by a total of 125 basis points. The Fund’s long positions in short term interest rates were particularly profitable as were the long positions in bonds. The reduction in interest rates created positive market sentiment. Profits continued to be posted to the Fund mid-quarter only to be offset by losses at the end of the quarter due to short term interest rates finishing down.

 

The agriculture sector posted profits for the Fund. Profits were posted to the Fund at the beginning of the year driven by long positions in corn and soybean. The agriculture sector was the best performing sector mid-quarter due to the robust gains from the Fund’s long positions in soybeans, coffee and wheat. Amid high volatility, the markets reversed sharply at the end of the quarter, causing long positions to give back some of their gains made earlier in the year.

 

The stock indices sector posted profits for the Fund. Short positions in many equity indices were profitable for the Fund at the beginning of the year which continued through the mid-quarter. Profits were posted for the Fund at the end of the quarter as short positions in stock indices took advantage of further market weakness, especially in Japan.

 

The currency sector posted profits for the Fund. After recent months that have witnessed higher volatility in foreign exchange, global currency markets were relatively subdued in January with a small loss in the currency sector. The Euro versus the U.S. dollar and the U.S. dollar versus the Swiss Franc pairs were the most profitable positions for the Fund after the U.S. dollar finished near record lows against several of the major currencies at the end of the mid-quarter. The currency sector finished profitably as positions benefited from the continued depreciation of the U.S. dollar against the Euro and Swiss Franc.

 

The metals sector posted profits for the Fund. Profits were posted to the Fund at the beginning of the year. The Fund’s long positions in precious metals accounted for much of the gains posted for the Fund in the middle of the quarter. The Fund struggled in the final weeks of the quarter with losses posted for the Fund from precious metals amid high market volatility.

 

The energy sector posted losses for the Fund. A negative contribution from energies as the strength in oil prices seen at the end of 2007 reversed posting losses for the Fund at the beginning of the quarter. The Fund’s long positions in oils accounted for much of the gains posted to the Fund mid-quarter. The energies sector saw more mixed results, but strong performance in gas oil and heating oil ensured a net profit for the Fund as the quarter ended.

 

20



 

April 1, 2008 to June 30, 2008

 

The Fund posted profits for the quarter with the currencies, energy, agriculture and stock indices sectors posting gains while the metals and interest rate sectors posted losses.

 

The currency sector posted profits for the Fund. Losses were posted to the Fund at the beginning of the quarter after the United States dollar strengthened late in April particularly against the Euro and the Swiss franc. Profits were posted to the Fund mid-quarter through the end of the quarter as emerging market currencies made gains against the majors.

 

The energy sector posted profits for the Fund.  Energies finished strong at the beginning of the quarter after crude oil advanced to reach new highs. Profits continued to be posted to the Fund mid-quarter due to the oil complex continued its surge to all-time highs. Important influences included supply disruptions, bullish inventory data, long-term analyst forecasts and a weakening United States dollar. The long position in natural gas was the best performer at the end of the quarter as energy prices continued to rally posting profits to the Fund.

 

The agriculture sector posted profits for the Fund. Marginal losses were posted to the Fund at the beginning of the quarter after key prices came off their recent highs. Losses continued to be posted to the Fund mid-quarter as many crops retreated from their recent highs causing some profit give back. The quarter ended with profits being posted to the Fund due to grain prices rocketing to record levels after poor weather affected the United States crop forecasts.

 

The stock indices sector posted profits for the Fund. Losses were posted to the Fund at the beginning of the quarter due to the Fund’s short positions in the stock indices. Losses continued to be posted to the Fund mid-quarter as global stock indices remained largely range bound. As the United States economy showed further signs of weakening, global stock markets fell steadily to the benefit of the Fund’s predominantly short stock indices positions resulting in the profit being posted to the Fund at the end of the quarter.

 

The metals sector posted losses for the Fund. Marginal losses were posted to the Fund at the beginning of the quarter after key prices came off their recent highs. Metals sector finished close to flat mid-quarter experiencing a mix of small offsetting returns. Amid high market volatility the quarter ended with profits being posted to the Fund.

 

The interest rate sector posted losses for the Fund.  Losses were posted to the Fund as conditions in the global equity and fixed income markets remained challenging at the beginning of the quarter with bonds incurring the most significant losses. However, through the middle of the quarter profits were posted to the Fund due to interest rates expectations becoming more hawkish in Europe and the United Kingdom. The quarter ended with profits being posted to the Fund due to the short positions in British and European markets following suggestions of rate increases at Jean Claude Trichet’s, President of the European Central Bank System press conference.

 

July 1, 2008 to September 30, 2008

 

The Fund posted an overall loss for the quarter with the stock indices, interest rates and the metals sectors posting gains while the agriculture, energy and the currency sectors posted losses.

 

The stock indices sector posted profits for the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter as sharp reversals occurred across a number of markets resulting in losses. Global markets were particularly volatile in September as a number of unexpected events had dramatic effects on overall market sentiment. Short positions in the stock indices resulted in profits posted to the Fund at the end of the quarter.

 

21



 

The interest rate sector posted profits for the Fund.  Losses were posted to the Fund at the beginning of the quarter due to losses in the European bond markets following the European Central Bank’s announcement that interest rates are likely to be maintained at current levels.  Profits were posted to the Fund in the middle of the quarter due to long positions in the bonds sector capitalizing on changing interest rate expectations as profits were seen in the United States and the Australian bond positions as well as in Japan following the Bank of Japan’s surprise decision to hold rates. The Program’s positioning of long bonds resulted in profits posted to the Fund at the end of the quarter.

 

The metals sector posted profits for the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter due to falling precious metal prices. However, short positions in base metals offset some of the losses as prices continued to fall due to negative industrial outlook and rising metal stocks. Recessionary concerns and stock build up continued to place downward pressure on industrial metals, especially aluminum resulting in profits being posted to the Fund at the end of the quarter.

 

The agriculture sector posted losses for the Fund. Losses were posted to the Fund at the beginning of the quarter due to the drop in corn prices. Losses continued to be posted to the Fund mid-quarter as grain prices continued to recede from recent highs. The quarter ended with losses being posted to the Fund due to the volatility in the global markets.

 

The energy sector posted losses for the Fund. Losses were posted to the Fund at the beginning of the quarter due to natural gas prices falling during the month of July. Energy prices continued to fall in the middle of the quarter due to the strengthening U.S. dollar despite a brief rally due to concerns that hurricanes in the United States would disrupt supply.  Losses continued to be posted at the end of the quarter due to market volatility.

 

The currency sector posted losses for the Fund. The Program’s performance was mildly positive due to a lack of direction in the market.  Losses were posted to the Fund at the middle of the quarter as a result of losses from the Fund’s short U.S. dollar exposure, which had generated profits up until July 2008. The relative strength of the U.S. dollar was driven by positive economic news in the United States and a change in interest rate expectations in Australia and Europe. The latter resulted in the largest daily decline in the Euro against the U.S. dollar in almost eight years. The quarter ended with losses being posted to the Fund due to the U.S. dollar continuing to strengthen as demand for the U.S. dollar funding increased amid the reduced liquidity in money markets, and emerging markets currencies declined as a result of risk aversion.

 

The Fund has no applicable off-balance sheet arrangements and tabular disclosure or contractual obligations of the type described in Items 303(a)(4) and 303(a)(5) of Regulation S-K.

 

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

 

The Fund is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes and all or substantially all of the Fund’s assets are subject to the risk of trading loss.  Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund’s main line of business.

 

Market movements result in frequent changes in the fair market value of the Fund’s open positions and, consequently, in its earnings and cash flow. The Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund’s open positions and the liquidity of the markets in which it trades.

 

22



 

The Fund, under the direction of Aspect, rapidly acquires and liquidates both long and short positions in a wide range of different markets.  Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund’s past performance is not necessarily indicative of its future results.

 

Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund’s speculative trading and the recurrence in the markets traded by the Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Fund’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the quantifications included in this section should not be considered to constitute any assurance or representation that the Fund’s losses in any market sector will be limited to Value at Risk or by the Fund’s attempts to manage its market risk.

 

Quantifying The Fund’s Trading Value At Risk

 

Quantitative Forward-Looking Statements

 

The following quantitative disclosures regarding the Fund’s market risk exposures contain “forward-looking statement” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

 

The Fund’s risk exposure in the various market sectors traded by Aspect is quantified below in terms of Value at Risk.  Due to the Fund’s mark-to-market accounting, any loss in the fair value of the Fund’s open positions is directly reflected in the Fund’s earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).

 

Maintenance margin requirements have been used by the Fund as the measure of its Value at Risk.  Maintenance margin requirements are set by exchanges to equal or exceed the maximum loss in the fair value of any given contract incurred in 95%-99% of the one-day time periods included in the historical sample (generally approximately one year) researched for purposes of establishing margin levels.  The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

 

In the case of market sensitive instruments which are not exchange-traded (almost exclusively currencies in the case of the Fund), the margin requirements for the equivalent futures positions have been used as Value at Risk.  In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.

 

100% positive correlation in the different positions held in each market risk category has been assumed.  Consequently, the margin requirements applicable to the open contracts have been aggregated to determine each trading category’s aggregate Value at Risk.  The diversification effects resulting from the fact that the Fund’s positions are rarely, if ever, 100% positively correlated have not been reflected.

 

23



 

The Fund’s Trading Value at Risk in Different Market Sectors

 

The following table indicates the average, highest and lowest trading Value at Risk associated with the Fund’s open positions by market category for the fiscal period. For the nine months ended September 30, 2009 and 2008, the Fund’s average Month-end Net Asset Value for all other purposes was approximately $290,444,007 and $284,584,563, respectively.

 

September 30, 2009

 

 

 

Average Value

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

at Risk

 

Capitalization

 

at Risk

 

at Risk

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

$

156,799

 

0.05

%

$

299,521

 

$

7,807

 

Currencies

 

1,031,056

 

0.35

%

2,084,800

 

313,886

 

Energy

 

198,225

 

0.07

%

481,439

 

26,673

 

Interest Rates

 

25,862,535

 

8.90

%

47,880,957

 

15,102,568

 

Metals

 

263,066

 

0.09

%

688,438

 

11,621

 

Stock Indices

 

396,709

 

0.14

%

1,223,683

 

18,996

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

27,908,390

 

9.60

%

$

52,658,838

 

$

15,481,551

 

 

September 30, 2008

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

822,686

 

0.29

%

$

3,229,047

 

$

147,261

 

Currencies

 

3,076,122

 

1.09

%

9,038,747

 

404,908

 

Energy

 

1,347,052

 

0.47

%

4,458,641

 

220,369

 

Interest Rates

 

19,961,801

 

7.01

%

41,848,012

 

8,163,193

 

Metals

 

543,664

 

0.19

%

2,047,636

 

139,919

 

Stock Indices

 

1,705,177

 

0.60

%

5,255,225

 

373,561

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

27,456,502

 

9.65

%

$

65,877,308

 

$

9,449,211

 

 

24



 

Material Limitations on Value at Risk as an Assessment of Market Risk

 

The face value of the market sector instruments held by the Fund is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund.  The magnitude of the Fund’s open positions creates a “risk of ruin” not typically found in most other investment vehicles.  Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Fund to incur severe losses over a short period of time.   The foregoing Value at Risk table — as well as the past performance of the Fund — gives no indication of this “risk of ruin.”

 

Non-Trading Risk

 

Foreign Currency Balances; Cash on Deposit with MLPF&S

 

The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial.

 

The Fund also has non-trading market risk on the approximately 90%-95% of its assets which are held in cash at MLPF&S. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies. This cash flow risk is immaterial.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding the Fund’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund’s primary market risk exposures as well as the strategies used and to be used by MLAI and Aspect for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of the time value of their investment in the Fund.

 

The following were the primary trading risk exposures of the Fund as of September 30, 2009, by market sector.

 

Interest Rates

 

Interest rate risk is the principal market exposure of the Fund.  Interest rate movements directly affect the price of derivative sovereign bond positions held by the Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact the Fund’s profitability. The Fund’s primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries.  However, the Fund also takes positions in the government debt of smaller nations e.g., Australia. MLAI anticipates that G-7 interest rates will remain the primary market exposure of the Fund for the foreseeable future.

 

25



 

Currencies

 

The Fund trades in a number of currencies. However, the Fund’s major exposures have typically been in the U.S. dollar/Japanese yen, U.S. dollar/Euro and U.S. dollar/Swiss franc positions.  The Fund does not anticipate that the risk profile of the Fund’s currency sector will change significantly in the future. The currency trading Value at Risk figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk of maintaining Value at Risk in a functional currency other than U.S. dollars.

 

Stock Indices

 

The Fund’s primary equity exposure is to S&P 500, Nikkei and German DAX equity index price movements. The Fund is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Asian indices.

 

Metals

 

The Fund’s metals market exposure is to fluctuations in both the price of precious and non-precious metals.

 

Agricultural Commodities

 

The Fund’s primary agricultural commodities exposure is to agricultural price movements which are often directly affected by severe or unexpected weather conditions. Grains, cocoa and livestock accounted for the substantial bulk of the Fund’s agricultural commodities exposure as of September 30, 2009.

 

Energy

 

The Fund’s primary energy market exposure is to natural gas and crude oil price movements, often resulting from political developments in the Middle East. Oil prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.

 

Qualitative Disclosures Regarding Non-Trading Risk Exposure

 

The following were the only non-trading risk exposures of the Fund as of September 30, 2009.

 

Foreign Currency Balances

 

The Fund’s primary foreign currency balances are in Japanese yen, British pounds, Norwegian krone, Swiss franc and Euros.

 

U.S. Dollar Cash Balance

 

The Fund holds U.S. dollars only in cash at MLPF&S. The Fund has immaterial cash flow interest rate risk on its cash on deposit with MLPF&S in that declining interest rates would cause the income from such cash to decline.

 

Item 4T. Controls and Procedures

 

MLAI, the Sponsor of ML Aspect FuturesAccess LLC, with the participation of the Sponsor’s Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Fund as of the end of the period of this quarterly report, and, based on this evaluation, has concluded that these disclosure controls and procedures are effective.  Additionally, there were no significant changes in the Fund’s internal controls or in other factors during the latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

26



 

PART II - OTHER INFORMATION

 

Item 1.                                   Legal Proceedings

 

None.

 

Item 1A.  Risk Factors

 

There are no material changes from risk factors as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 31, 2009.

 

Item 2.                                   Unregistered Sales of Equity Securities and Use of Proceeds

 

(a)          Issuance to accredited investors pursuant to Regulation D and Section 4(6) under the Securities Act.  The selling agent of the following Class of Units was MLPF&S.

 

CLASS A

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

 

 

1.5925

 

Feb-09

 

612,698

 

383,056

 

1.5995

 

Mar-09

 

196,943

 

122,477

 

1.6080

 

Apr-09

 

203,771

 

131,076

 

1.5546

 

May-09

 

233,981

 

155,459

 

1.5051

 

Jun-09

 

121,873

 

82,850

 

1.4710

 

Jul-09

 

452,391

 

335,179

 

1.3497

 

Aug-09

 

268,870

 

202,097

 

1.3304

 

Sep-09

 

332,467

 

240,779

 

1.3808

 

Oct-09

 

73,804

 

51,972

 

1.4201

 

 

CLASS C

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

442,877

 

287,732

 

1.5392

 

Feb-09

 

696,976

 

451,205

 

1.5447

 

Mar-09

 

1,227,957

 

791,413

 

1.5516

 

Apr-09

 

1,441,995

 

962,100

 

1.4988

 

May-09

 

547,990

 

377,952

 

1.4499

 

Jun-09

 

844,977

 

596,776

 

1.4159

 

Jul-09

 

713,878

 

549,983

 

1.2980

 

Aug-09

 

526,128

 

411,584

 

1.2783

 

Sep-09

 

360,033

 

271,579

 

1.3257

 

Oct-09

 

1,062,612

 

780,013

 

1.3623

 

 

CLASS D

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

 

 

1.7137

 

Feb-09

 

 

 

1.7234

 

Mar-09

 

 

 

1.7347

 

Apr-09

 

 

 

1.6790

 

May-09

 

 

 

1.6277

 

Jun-09

 

 

 

1.5928

 

Jul-09

 

 

 

1.4633

 

Aug-09

 

 

 

1.4441

 

Sep-09

 

 

 

1.5007

 

Oct-09

 

 

 

1.5454

 

 

CLASS I

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

9,999

 

6,192

 

1.6148

 

Feb-09

 

19,999

 

12,326

 

1.6225

 

Mar-09

 

259,995

 

159,350

 

1.6316

 

Apr-09

 

10,999

 

6,970

 

1.5781

 

May-09

 

69,999

 

45,798

 

1.5284

 

Jun-09

 

49,999

 

33,460

 

1.4943

 

Jul-09

 

119,998

 

87,494

 

1.3715

 

Aug-09

 

12,999

 

9,613

 

1.3523

 

Sep-09

 

24,999

 

17,804

 

1.4041

 

Oct-09

 

41,165

 

28,498

 

1.4445

 

 

CLASS DS

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

1,014,112

 

594,264

 

1.7065

 

Feb-09

 

1,916,850

 

1,116,915

 

1.7162

 

Mar-09

 

954,491

 

552,559

 

1.7274

 

Apr-09

 

3,054,678

 

1,827,070

 

1.6719

 

May-09

 

3,565,504

 

2,199,977

 

1.6207

 

Jun-09

 

2,824,554

 

1,780,930

 

1.5860

 

Jul-09

 

8,190,706

 

5,621,624

 

1.4570

 

Aug-09

 

1,951,715

 

1,357,338

 

1.4379

 

Sep-09

 

 

 

1.4943

 

Oct-09

 

 

 

1.5388

 

 

CLASS DT

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

 

 

1.7440

 

Feb-09

 

 

 

1.7551

 

Mar-09

 

 

 

1.7679

 

Apr-09

 

 

 

1.7110

 

May-09

 

522,026

 

314,606

 

1.6593

 

Jun-09

 

 

 

1.6245

 

Jul-09

 

3,039,694

 

2,035,964

 

1.4930

 

Aug-09

 

 

 

1.4740

 

Sep-09

 

 

 

1.5325

 

Oct-09

 

2,085,585

 

1,320,994

 

1.5788

 

 


(1) Beginning of the month Net Asset Value for all other purposes

 

(b) None.

(c) None.

 

27



 

Item 3.                                  Defaults Upon Senior Securities

 

None.

 

Item 4.                                  Submission of Matters to a Vote of Security Holders

 

None.

 

Item 5.                                  Other Information

 

None.

 

Item 6.                                  Exhibits

 

The following exhibits are incorporated by reference or are filed herewith to this Quarterly Report on Form 10-Q:

 

31.01 and

31.02                                             Rule 13a-14(a)/15d-14(a) Certifications

 

Exhibit 31.01

and 31.02:                   Are filed herewith.

 

32.01 and

32.02                                             Section 1350 Certifications

 

Exhibit 32.01

and 32.02                      Are filed herewith.

 

28



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

ML ASPECT FUTURESACCESS LLC

 

 

 

 

 

By:

MERRILL LYNCH ALTERNATIVE

 

 

INVESTMENTS LLC

 

 

(Manager)

 

 

 

 

 

 

Date: November 12, 2009

By

/s/ JUSTIN C. FERRI

 

 

Justin C. Ferri

 

 

Chief Executive Officer, President and Manager

 

 

(Principal Executive Officer)

 

 

 

 

 

 

Date: November 12, 2009

 

 

 

By

/s/ BARBRA E. KOCSIS

 

 

Barbra E. Kocsis

 

 

Chief Financial Officer

 

 

(Principal Financial and Accounting Officer)

 

29